The Payments and Settlements Systems Act, 2007 forbids banks and system providers from deducting amounts from a person’s account when a person makes or receives payments through RuPay Debit cards or BHIM-UPI transactions.
The Finance Ministry stated the incentives paid by the government to banks for advancing RuPay debit cards and low-value BHIM-UPI transactions will not aid in increasing GST revenue collections.
The Payments and Settlements Systems Act of 2007 disallows the process of charging an amount from a person’s account at the time of making or receiving payment through EuPay Debit cards or BHIM.
Owing to the norms of the scheme, the government pays banks an incentive by taking as a percentage of the value of the RuPay Debit card transactions and low-value BHIM-UPI transactions up to Rs 2,000.
In a circular to the chief commissioners of GST, the Ministry said the incentive will be figured in as a subsidy directly linked to the price of the service and that it would not be represented as a part of the taxable value of the transaction with referencing the provisions given under the Central GST Act, 2017.
By considering the recommendations of the Council, the incentives paid by MeitY (Ministry of Electronics and Information Technology) to acquiring banks under the Incentive scheme for the promotion of RuPay Debit Cards and low-value BHIM-UPI transactions are reckoned as subsidies and thus not be taxable.
Additionally, the CBIC clarified the applicability of GST on accommodation services provided by Air Force Mess to the personnel, if the above-mentioned services supplied by Air Force Mess, Army mess, Navy mess, Paramilitary, and Police forces mess to their personnel, or any person other than a business entity are considered as tax neutral.
“It is hereby clarified that accommodation services offered by Air force Mess and other similar messes, such as Army mess, Navy mess, Paramilitary, and Police forces mess to their personnel or any person other than a business entity are covered by SI. NO. 6 of notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 provided the services supplied by such messes qualify to be considered as services supplied by Central Government, State Government, Union Territory or local authority,” the Ministry said.
With this detail, a few specified services are being offered at the postal department, and transportation supplied by Central or State Governments or local authorities to any person other than business entities are exempt from GST.
Last week the Union Cabinet granted a scheme worth Rs 2,600 crore incentive scheme for banks to promote RuPay debit cards and low-value BHIM-UPI (Bharat Interface for Money-Unified Payments Interface) transactions in the current financial year 2022-23.
The scheme was introduced to bolster Point of Sale (PoS) devices and e-commerce transactions using RuPay and UPI by providing financial incentives to banks in the ongoing financial year. In addition, building a robust digital payment ecosystem through the means of promoting UPI Lite and UPI123PAY as economical and user-friendly digital payment options.
Also read: GST Council meet 2022: No changes in tax rates
